Essa backs $38.7m Danish takeover

Belmont-based Essa Australia has recommended shareholders accept a $38.7 million off-market takeover offer by publicly listed Danish company FLSmidth & Co.

FLS is offering 73 cents per Essa share which is a premium of 33 per cent over the closing price of 55 cents on Friday.

The takeover is subject to a number of conditions, including that Essa acquire a relevant interest in at least 90 per cent before January 28.

The Implementation Agreement also includes a break fee of $500,000.

"The Directors of Essa ... have carefully considered the Offer and unanimously recommend that Shareholders accept the Offer in the absence of a superior proposal and advise that they will accept the Offer in respect of any shares in Essa that they own or control, subject in each case only to there being no superior proposal," the company said in a statement to the Australian Securities Exchange.

Collectively the directors have a 12 per cent stake in Essa.

"Essa provides an excellent fit with FLS's capabilities as a leading supplier of equipment, systems and services to the global cement and minerals industries," said Essa chairman Geoff Donohue.

"The strategies and culture of both companies are complementary and the Board believes that the combination of the two businesses provides the best opportunities for future expansion," said Mr Donohue.

"We believe that this Offer maximises value for all Essa shareholders and are delighted that, in the absence of a superior proposal, Essa's Directors will recommend that Essa shareholders accept the Offer," said FLS group chief executive officer Jørgen Huno Rasmussen.

See company statement below:

Essa Australia Limited ("Essa") is pleased to announce that it has reached an agreement with FLSmidth & Co. A/S ("FLS"), a publicly listed company headquartered in Denmark, under which FLS will offer to acquire 100% of the fully paid ordinary shares in Essa by way of an off-market takeover (the "Offer").

The Offer
The Offer price is $0.73 cash per Essa share ("Offer Price") (subject to any dividend adjustment). If the Offer is declared unconditional, the Board of Essa will be entitled to declare and pay a fully franked dividend of up to $0.13 cash per Essa share ("Dividend"), in which case the Offer Price will be reduced by the cash amount of the Dividend.

The Offer Price values Essa at approximately A$38.7 million and represents a significant premium to Essa's recent share price as follows:
a premium of 33% over the closing price of Essa's shares on the trading day prior to this announcement (3 December 2010) of $0.55;
a premium of 36% over the volume weighted average share price of Essa's shares in the one month period prior to today's announcement of $0.536; and
a premium of 63% over the volume weighted average share price of Essa's shares in the three month period prior to today's announcement of $0.447.

The Offer is subject to an Implementation Agreement entered into by Essa and FLS on 5 December 2010 and will be conditional upon the satisfaction of certain conditions, including the requirement that FLS acquires a relevant interest in at least 90% of Essa's ordinary share capital on issue during, or at the end, of the Offer period. A full list of the conditions of the Offer is attached to this announcement as Appendix A.

The Implementation Agreement also includes a break fee of $500,000 (excluding GST) payable to FLS in certain circumstances, as well as customary "lock-up" restrictions in connection with competing proposals. A summary of the key terms of the Implementation Agreement is attached to this announcement as Appendix B.

Recommendation
The Directors of Essa, with the assistance of its advisors, have carefully considered the Offer and unanimously recommend that Shareholders accept the Offer in the absence of a superior proposal and advise that they will accept the Offer in respect of any shares in Essa that they own or control, subject in each case only to there being no superior proposal. The Directors collectively have a relevant interest in approximately 12% of Essa's ordinary share capital.

Comment
Commenting on the Offer, the Chairman of Essa, Mr Geoff Donohue, said "Essa provides an excellent fit with FLS's capabilities as a leading supplier of equipment, systems and services to the global cement and minerals industries. The strategies and culture of both companies are complementary and the Board believes that the combination of the two businesses provides the best opportunities for future expansion".

"FLS has recognised in the value of its Offer the strength of Essa's business and its future prospects. In short, we believe the Offer is in the best interests of the Company and its stakeholders."

Mr Jørgen Huno Rasmussen, Group Chief Executive Officer of FLS, said "We believe that this Offer maximises value for all Essa shareholders and are delighted that, in the absence of a superior proposal, Essa's Directors will recommend that Essa shareholders accept the Offer.

"Essa is a high quality equipment provider to the global mining industry and will play an important role in FLSmidth's international growth strategy. We intend to leverage Essa and its local management team to expand our existing Far East/Pacific Rim businesses and extend our footprint in the region. We believe the expertise within Essa's local anagement team, combined with the capital and management support of FLS, will provide a strong, long-term platform for growth.

"It has been our intention to structure a transaction that is acceptable to the Directors of Essa and which provides a clear, certain and value-based outcome for all Essa shareholders. I am very confident we have achieved those objectives."

Timetable
Essa understands that the Bidder's Statement will be lodged with ASIC on or about 7 December 2010 and dispatched to Essa shareholders together with the Target's Statement on or about 21 December 2010. These documents will outline the full details of the Offer and the Offer process, as well as instructions on how to accept the Offer.

The Offer is expected to be open for acceptance by Essa shareholders until 28 January 2011, subject to FLS's right to extend the offer period in accordance with the Corporations Act.

Advisors
Essa is being advised by TC Corporate as financial advisor and Norton Rose Australia as legal advisor.